China Active Fund Watch Q1 2022: Pension Target FOF, the 3rd Pillar Pioneer

Investao Limited > Insight > China Active Fund Watch Q1 2022: Pension Target FOF, the 3rd Pillar Pioneer

Topic: How have the private pension products, the 3rd pillar, been performing so far?

Author: InvesTAO Research

Summary

  • Pension target FoFs, a group of Chinese private pension investment funds that mostly consist of target-date FOFs and target-risk FOFs, have proven to be the a successful pioneer in China’s 3rd Pillar pension reform.

    With BOCOM Schroder and Aegon-Industrial in the lead, pension Target FOFs have reached US$16.6bn of net assets, with a growth of 84% compared to 2020. China’s new private pension program, encouraging Chinese citizens to contribute towards a personal pension account every year, opens up more opportunities for international asset managers

  • Target-risk funds make up 85% of pension target FOFs despite the initial design encouraging more allocation to target-date funds to align with global market trends.

    More risk profiles other than conservatives are being explored but the current stock market volatility presents a challenge to such strategies.

  • Asset managers have diversified focuses in time series and allocation in target-date strategies.

    ChinaAMC is the leader of China’s target-date FOFs with the most AUM at nearly US$500mn. In addition, Zhong Ou’s fund offering document introduced a clear and detailed glide path, deemed distinct among their peers and demonstrates their efforts in investor education in this new asset class.

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